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Exam 10: Pure Competition in the Short Run

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Question 31

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If a firm in a purely competitive industry is confronted with an equilibrium price of $5,its marginal revenue:

A) may be either greater or less than $5.
B) will also be $5.
C) will be less than $5.
D) will be greater than $5.

E) A) and C)
F) A) and D)

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Question 32

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Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}\begin{array}{c}\\Total\\Product\\\hline1 \\2 \\3 \\4 \\5 \\6 \\7 \\8 \\9 \\10 \\11 \\12\end{array}\begin{array}{lll}Average\\Fixed\\Cost\\\hline \$ 100.00 \\ 50.00 \\ 33.33 \\ 25.00 \\ 20.00 \\16.67\\ 14.29 \\ 12.50 \\ 11.11 \\ 10.00 \\ 9.09 \\ 8.33 \\\end{array}\begin{array}{lll}Average\\Variable\\Cost\\\hline \$ 17.00 \\ 16.00 \\ 15.00 \\ 14.25 \\ 14.00 \\ 14.00 \\15.71\\ 17.50 \\19.44 \\ 21.60 \\ 24.00 \\ 26.67 \end{array}\begin{array}{ccc}\text { Average }\\\text { Total } &&\text { Marginal }\\\text { Cost }&&\text { Cost }\\\hline \$ 117.00 & & \$ 17 \\66.00 & & 15 \\48.33 & & 13 \\39.25 & & 12 \\34.00 & & 13 \\30.67 & & 14 \\30.00 & & 26 \\30.00 & & 30 \\30.55 & & 35 \\31.60 & & 41 \\33.09 & & 48 \\35.00 & & 56\end{array}\end{array}$ Refer to the data.Which of the following is the firm's short-run supply schedule?

A)
$\begin{array}{cc}\text { Price } & Q_{s} \\\hline \$ 50 & 12 \\42 & 10 \\36 & 8 \\32 & 8 \\20 & 6 \\13 & 0\end{array}$
B)
$\begin{array}{cc}\text { Price } & Q_{s} \\\hline \$ 50 & 12 \\42 & 11 \\36 & 9 \\32 & 8 \\20 & 6 \\13 & 5\end{array}$
C)
$\begin{array}{cc}\text { Price } & Q_{s} \\\hline \$ 50 & 11 \\42 & 10 \\36 & 9 \\32 & 8 \\20 & 6 \\13 & 0\end{array}$
D)
$\begin{array} { c c } \text { Price } & Q _ { s } \\\hline \$ 50 & 11 \\42 & 10 \\36 & 9 \\32 & 8 \\20 & 6 \\13 & 5\end{array}$

E) A) and B)
F) B) and D)

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Question 33

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Answer the question on the basis of the following cost data for a purely competitive seller: $\begin{array}{ccc}\begin{array}{c}&\text { Total } \\\text { Total }&\text { Fixed } \\\text { Output }&\text { Cost }\\\hline0&\$50\\1 & 50 \\2 & 50 \\3 & 50 \\4 & 50 \\5 & 50 \\6 & 50\end{array}\begin{array}{cc}\text { Total } &\\\text { Variable }&\text { Total } \\\text { Cost }&\text { Cost }\\\hline\$ 0 & \$ 50 \\70 & 120 \\120 & 170 \\150 & 200 \\220 & 270 \\300 & 350 \\390 & 440\end{array}\end{array}$ Refer to the data.The marginal cost of the fifth unit of output is:

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}\begin{array}{c}\\\text {Total}\\\underline{\text {Product}}\\1 \\2 \\3 \\4 \\5 \\6 \\7 \\8 \\9 \\10 \\11 \\12\end{array}\begin{array}{c}\text {Average}\\\text {Fixed }\\\underline{\text {Cost }}\\\$ 100.00 \\50.00 \\33.33 \\25.00 \\20.00 \\16.67 \\14.29 \\12.50 \\11.11 \\10.00 \\9.09 \\8.33\end{array}\begin{array}{c}\text {Average}\\\text {Variable}\\\underline{\text {Cost}} \\\$ 17.00 \\16.00 \\15.00 \\14.25 \\14.00 \\14.00 \\15.71 \\17.50 \\19.44 \\21.60 \\24.00 \\26.67\end{array}\begin{array}{c}\text {Average}\\\text {Total}\\\underline{\text {Cost}}\\ \$ 117.00 \\66.00\\48.33\\39.25\\34.00\\30.67\\30.00\\30.00\\30.55\\31.60\\33.09\\35.00\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Cost}}\\ \$ 17 \\15\\13\\12\\13\\14\\26 \\30\\30 \\35\\41\\48 \\56\end{array}\end{array}$ Refer to the data.If there were 1,000 identical firms in this industry and total or market demand is as shown below,equilibrium price will be: $\begin{array}{l}\begin{array} { c c }Price& \text { Quantity Demanded }\\ \hline \$ 50 & 3,000 \\42 & 6,000 \\36 & 9,000 \\32 & 11,000 \\20 & 14,000 \\13 & 19,500\end{array}\end{array}$

Economists use the term imperfect competition to describe:

Assume a purely competitive firm is selling 200 units of output at $3 each.At this output,its total fixed cost is $100 and its total variable cost is $350.This firm:

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market. $\begin{array}{ccccc}& \text { Average } & \text { Average } & \text { Average } & \\\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \\2 & 75.00 & 23.00 & 98.00 & 21.00 \\3 & 50.00 & 20.00 & 70.00 & 14.00 \\4 & 37.50 & 21.00 & 58.50 & 24.00 \\5 & 30.00 & 23.00 & 53.00 & 31.00 \\6 & 25.00 & 25.00 & 50.00 & 35.00 \\7 & 21.43 & 28.00 & 49.43 & 46.01 \\8 & 18.75 & 33.00 & 51.76 & 68.07 \\9 & 16.67 & 39.00 & 55.67 & 86.95 \\10 & 15.00 & 48.00 & 63.00 & 128.97\end{array}$ Refer to the data.If the market price for this firm's product is $35,it will produce:

The following table applies to a purely competitive industry composed of 100 identical firms. $\begin{array}{lcl}Quantity&&Quantity\\Demanded &Price &Supplied\\\hline400,000 & \$ 5 & 800,000 \\500,000 & 4 & 700,000 \\600,000 & 3 & 600,000 \\700,000 & 2 & 500,000 \\800,000 & 1 & 400,000\end{array}$ Refer to the table.For each of the 100 firms in this industry,marginal revenue and total revenue will be:

Which of the following statements is correct?

Firms in a monopolistically competitive industry have no reason to engage in nonprice competition because their products are uniquely different from other sellers in the market.

A competitive firm will maximize profits at that output at which:

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}\begin{array}{c}\\Total\\Product\\\hline1 \\2 \\3 \\4 \\5 \\6 \\7 \\8 \\9 \\10 \\11 \\12\end{array}\begin{array}{lll}Average\\Fixed\\Cost\\\hline \$ 100.00 \\ 50.00 \\ 33.33 \\ 25.00 \\ 20.00 \\16.67\\ 14.29 \\ 12.50 \\ 11.11 \\ 10.00 \\ 9.09 \\ 8.33 \\\end{array}\begin{array}{lll}Average\\Variable\\Cost\\\hline \$ 17.00 \\ 16.00 \\ 15.00 \\ 14.25 \\ 14.00 \\ 14.00 \\15.71\\ 17.50 \\19.44 \\ 21.60 \\ 24.00 \\ 26.67 \end{array}\begin{array}{ccc}\text { Average }\\\text { Total } &&\text { Marginal }\\\text { Cost }&&\text { Cost }\\\hline \$ 117.00 & & \$ 17 \\66.00 & & 15 \\48.33 & & 13 \\39.25 & & 12 \\34.00 & & 13 \\30.67 & & 14 \\30.00 & & 26 \\30.00 & & 30 \\30.55 & & 35 \\31.60 & & 41 \\33.09 & & 48 \\35.00 & & 56\end{array}\end{array}$ Refer to the data.If the market price for the firm's product is $28,the competitive firm will:

In the short run,a purely competitive seller will shut down if:

Answer the question on the basis of the following data confronting a firm: $\begin{array}{l}\begin{array}{ccr}&&\text { Marginal }\\\text { Output } & & \text { Reven } \\\hline0&&--\\1 & & \$ 16 \\2 & & 16 \\3 & & 16 \\4 & & 16 \\5 & & 16\end{array}\begin{array}{c}Marginal\\Cost\\\hline--\\\$ 10 \\9 \\13 \\17 \\21\end{array}\end{array}$ Refer to the data.This firm is selling its output in a(n) :

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}\begin{array}{c}\\Total\\Product\\\hline1 \\2 \\3 \\4 \\5 \\6 \\7 \\8 \\9 \\10 \\11 \\12\end{array}\begin{array}{lll}Average\\Fixed\\Cost\\\hline \$ 100.00 \\ 50.00 \\ 33.33 \\ 25.00 \\ 20.00 \\16.67\\ 14.29 \\ 12.50 \\ 11.11 \\ 10.00 \\ 9.09 \\ 8.33 \\\end{array}\begin{array}{lll}Average\\Variable\\Cost\\\hline \$ 17.00 \\ 16.00 \\ 15.00 \\ 14.25 \\ 14.00 \\ 14.00 \\15.71\\ 17.50 \\19.44 \\ 21.60 \\ 24.00 \\ 26.67 \end{array}\begin{array}{ccc}\text { Average }\\\text { Total } &&\text { Marginal }\\\text { Cost }&&\text { Cost }\\\hline \$ 117.00 & & \$ 17 \\66.00 & & 15 \\48.33 & & 13 \\39.25 & & 12 \\34.00 & & 13 \\30.67 & & 14 \\30.00 & & 26 \\30.00 & & 30 \\30.55 & & 35 \\31.60 & & 41 \\33.09 & & 48 \\35.00 & & 56\end{array}\end{array}$ Refer to the data.If the market price for the firm's product is $32,the competitive firm will produce:

A firm reaches a break-even point (normal profit position) where:

Firms seek to maximize:

On a per unit basis,economic profit can be determined as the difference between:

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

In the short run,a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost.